Arian Silver Corp.'s shares fell Friday after the company posted an annual loss as revenues and production were hit by suspended mining operations.

The Mexico-focused silver miner reported a gross loss of $0.76m for 2012, compared to a profit of $0.81m the previous year, while revenues plunged to $4.5m from $7.4m in 2011.

A dispute with mill owner Contracuna SA de CV halted production last July and drove down output.

"Although all amounts owed to Arian by Contracuna have now been repaid, Arian has submitted a claim for damages, which has been met by a counter-claim by Contracuna, which Arian believes, has been submitted solely to frustrate the legal process and is without merit," the company said in a statement.

Tonnes of silver mined dropped 48% year-on-year to 0.51m and ounces of silver sold dropped 25% to 0.17m.

During the year, Arian conducted further metallurgical testing, achieving recoveries of 80%.

In November, Arian agreed terms for toll milling of a minimum of 0.90m tonnes of run of mine ore at a cost of $38 per tonne with a newly refurbished plant in Zacatecas, which has a capacity of 500 tonnes per day. The plant is owned and controlled by independent third party, Juan Reyes, and toll milling began in February.

Arian's flagship property San Jose was upgraded by 32% to more than 117m ounces and the company acquired land to accommodate a proposed custom mill.

"In addition, we concluded independent studies on mining, plant design and metallurgy, as well as a technical audit combining the results of these studies," Chief Executive Officer, Jim Williams, said.

"These have been important steps for the company's growth plans, and coupled with the intended acquisition of a custom mill, can be expected to result in significantly improved efficiencies through better metal recoveries, higher throughput and lower overall production costs."

Shares tumbled 5.66% to 12.50p at 15:22 Friday.

RD

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